Examining the Impact of Baumol’s Cost Disease in Brazilian Municipal Education: A Decade Analysis (2009-2019)

Abstract

This paper examines the phenomenon known as Baumol’s cost disease within the Brazilian educational sector between 2009 and 2019, marked by substantial changes in teacher salaries and student-teacher ratios. Baumol’s cost disease describes the rise in salaries despite low productivity growth in sectors that do not benefit substantially from technological improvements. In education, salaries increased by establishing a national wage floor and decreasing student-teacher ratios. The study adapts Baumol’s model to the modern educational context, analysing the correlation between teacher remuneration and productivity and incorporating contemporary economic and policy dynamics. The findings indicate that, contrary to the theoretical expectation of a U-shaped curve for per capita educational spending, costs per student tend to decrease with the increase in municipal population size, with an exception observed in the largest cities. This paper contributes to the understanding of public spending on education in Brazil, highlighting the need for differentiated policy approaches to manage escalating costs in smaller municipalities and ensure equitable education quality across different municipal sizes.